Sell calls are pretty rare on Wall Street, so when analysts collectively give any name a thumbs down it’s probably wise to toss it in the stocks to sell – or at least avoid – pile.
Fortunately, as noted, such stocks are indeed unusual. To get a sense of just how reluctant industry analysts are to issue Sell recommendations, simply take a look at the S&P 500. Only five components of the benchmark index rate a consensus recommendation of Sell, per S&P Global Market Intelligence.
Interestingly, four of these names happen to be members of the S&P 500 Dividend Aristocrats, an index of companies that have increased their dividends annually for at least 25 consecutive years. The Aristocrats are generally considered to be the best dividend stocks for dividend growth, and long-term investors shouldn’t dump them automatically just because analysts are negative on them at current levels.
Remember: When an analyst rates a stock at Sell, all that implies is that the equity in question is forecast to underperform the broader market by some margin over the next 12 months or so. Income investors with extended holding periods – we’re talking anywhere from five years to decades – needn’t worry about such shorter term concerns. The magic of compounding will still redound to truly patient dividend-growth investors.
Here’s how we found the five stocks to sell or avoid now. Using data from S&P Global Market Intelligence, we screened the S&P 500 for the stocks with the highest-conviction consensus Sell recommendations by industry analysts.
A note on how the ratings system works: S&P surveys analysts’ stock calls and scores them on a five-point scale, where 1.0 equals a Strong Buy and 5.0 is a Strong Sell. Any score higher than 3.5 means that analysts, on average, rate the stock at Sell. The closer a score gets to 5.0, the stronger the consensus Sell recommendation.
After running the screen we were left with the five following names. Although they come from sectors as diverse as consumer staples, financials and utilities, they all have one thing in common: The Street expects them to underperform the broader market over the next year or so.
Market data and analysts’ recommendations are as of March 8, courtesy of S&P Global Market Intelligence. Stocks are listed by strength of conviction of analysts’ Sell calls, from weakest to strongest.